United Arab Emirates: Expatriate Employment Contracts In The UAE

It is mandatory for an expatriate employee to sign a labour
contract in the format stipulated by the Ministry of Labour prior
to commencing employment. This contract will govern the
relationship between the employer and employee and a copy of the
contract is to be submitted to the Ministry. This article discusses
the different types of expatriate employment contract available
under UAE law and their impact on employees and employers.

Types of Contract

Generally, an expatriate employee contract will either be for a
limited period or for an unlimited period. A limited contract is
where the employment term is fixed for a specified duration, not
exceeding four years, though it may be renewed by mutual agreement
for a similar or shorter period, on one or more occasions. Any
renewals will be considered as an extension of the original period
and will be included in calculating the employee's total length
of service.

A contract shall be considered under the law as an unlimited
contract, if it is not made in writing, is concluded for an
unlimited period, is concluded for a limited period and both
parties continue to perform their roles and responsibilities under
the contract after expiry of its original term without a written
agreement, or is concluded for the execution of specific work with
no fixed duration and due to its nature, the contract continues
after completion of the agreed work.

Advantages and Disadvantages

Many would argue that in a country like the UAE, where
large-scale projects are plentiful, a limited contract offers
stability for both employer and employee. It ensures that the
employee is available to the employer for the duration of the
project, thereby contributing to its overall success. Accordingly,
such contracts are generally preferred by companies engaged in the
execution of projects, for example in the construction sector.

On the other hand however, the limited contract can be seen as
being rigid in nature in that it forces an employee to stay in
employment even where they may wish to leave. It is contended that
an unlimited contract offers better flexibility for the
employer-employee relationship as both are free to terminate should
they wish within the confines of the contract and UAE law.

Termination of a Limited Contract

If a limited contract is terminated by an employee, they may be
required to compensate the employer, for any prejudice the latter
may sustain as a result of their resignation. The compensation,
however, cannot exceed half of the employee's remuneration for
3 months or the residual period of the contract, whichever is
shorter (unless the contract provides otherwise).

If however the employee's premature termination of the
agreement is without a valid reason, they may not be permitted
(even with the employer's consent) to take up employment with
another company for one year from the date of resignation.
Accordingly, the Ministry may impose a labour ban on the employee
for one year. In addition, the employee will not be entitled to
severance pay unless his continuous period of service exceeds 5
years.

Where there is a limited contract and an employer terminates,
they shall be required to compensate the employee and compensation
shall not exceed the employee's remuneration for 3 months or
the residual period of the contract, whichever is shorter (unless
the contract provides otherwise).

Termination of an Unlimited Contract

Either party may terminate an unlimited contract for a valid
reason at any time following its conclusion, by providing 30 days
notice to the other party.

The contract shall continue to be valid throughout the notice
period and the employee is obliged to work and entitled to full pay
during the notice period. The parties are not permitted to dispense
with the requirement of notice or reduce its period though they may
mutually agree to increase it.

If either of the parties fails to provide ample notice, the
terminating party will be required to pay compensation in lieu of
notice – in an amount equal to the employee's
remuneration for the entire period of notice or the time by which
it was reduced.

An employee who notifies an employer of their intention to
terminate an unlimited contract and leaves before the expiry of
their notice period shall not be permitted (even with the
employer's consent), to work for another company for one year
from the date on which they leave their previous employer.

Arbitrary Termination

An employee's termination can be seen as arbitrary by the
employer if the reason for termination is, irrelevant to the work,
pursuant to a serious complaint submitted by the employee to the
authorities or, pursuant to the commencement of legal proceedings
by the employee against the employer that has proven to be
valid.

Where an employee is arbitrarily dismissed, the court can order
the employer to pay compensation. This compensation shall be
assessed upon the nature of the job, the amount of prejudice the
employee has sustained and the duration of service etc. The
compensation however, shall not exceed 3 months remuneration.

Impact of Termination

For both parties, an important point to note prior to entering
into any employment contract is the impact caused by its
termination. In the event an employee decides to terminate a
limited contract, before the period stipulated, they may face a
labour ban and as a result they may not be allowed to enter the UAE
on an employment visa until one year has passed.

On the contrary, in accordance with recent changes introduced by
the Ministry of Labour, an employee with an unlimited contract who
has completed two years of continuous service is able to change job
without the employer's permission.

Conclusion

It is important that expatriate employees understand the
difference between limited and unlimited contracts before executing
a contract and it is important that the relationship between
employee and employer is transparent in order to avoid any of the
pitfalls outlined above. The right contract for the right job and
circumstances should be mutually beneficial to employer and
employee and both parties should understand their rights and
responsibilities under the contract, especially with regards to
termination and the implications this can have on both parties
under UAE law.

As the name implies, end of service gratuity is an amount of money that every employee is entitled to receive, and every employer is liable to pay, upon termination of an employment relationship in the UAE, provided that the employee meets the conditions set out in the Labour Law (UAE Federal Law No.8 of 1980).

Employment relationships in the United Arab Emirates are governed by Federal Law No.8 of 1980 Regulating Labour Relations as amended by Federal Laws No.24 of 1981, No.15 of 1985 and No.12 of 1986 (the Labour Law).

One of the most debated issues in an employment agreement is the legality of restrictive covenant provisions, such as a non-compete clause which prevents employees from working for a competitor upon termination of their employment agreement.

The UAE has a high percentage of working women which statistics recognise as an important and productive workforce.

Some comments from our readers…“The articles are extremely timely and highly applicable”“I often find critical information not available elsewhere”“As in-house counsel, Mondaq’s service is of great value”

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you
are granted a non-exclusive, revocable license to access the Website under its
terms and conditions of use. Your use of the Website constitutes your agreement
to the following terms and conditions of use. Mondaq Ltd may terminate your use
of the Website if you are in breach of these terms and conditions or if Mondaq
Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to
read the full text of the content and articles available (the Content). You may
not modify, publish, transmit, transfer or sell, reproduce, create derivative
works from, distribute, perform, link, display, or in any way exploit any of the
Content, in whole or in part, except as expressly permitted in these terms &
conditions or with the prior written consent of Mondaq Ltd. You may not use
electronic or other means to extract details or information about Mondaq.com’s
content, users or contributors in order to offer them any services or products
which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the
suitability of the information contained in the documents and related graphics
published on this server for any purpose. All such documents and related
graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or
its respective suppliers hereby disclaim all warranties and conditions with
regard to this information, including all implied warranties and conditions of
merchantability, fitness for a particular purpose, title and non-infringement.
In no event shall Mondaq Ltd and/or its respective suppliers be liable for any
special, indirect or consequential damages or any damages whatsoever resulting
from loss of use, data or profits, whether in an action of contract, negligence
or other tortious action, arising out of or in connection with the use or
performance of information available from this server.

The documents and related graphics published on this server could include
technical inaccuracies or typographical errors. Changes are periodically added
to the information herein. Mondaq Ltd and/or its respective suppliers may make
improvements and/or changes in the product(s) and/or the program(s) described
herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally
identifies you, including what sort of information you are interested in, for
three primary purposes:

To allow you to personalize the Mondaq websites you are visiting.

To enable features such as password reminder, newsletter alerts, email a
colleague, and linking from Mondaq (and its affiliate sites) to your website.

Mondaq (and its affiliate sites) do not sell or provide your details to third
parties other than information providers. The reason we provide our information
providers with this information is so that they can measure the response their
articles are receiving and provide you with information about their products and
services.

If you do not want us to provide your name and email address you may opt out
by clicking here .

If you do not wish to receive any future announcements of products and
services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to
view the free information on the site. We also collect information from our
users at several different points on the websites: this is so that we can
customise the sites according to individual usage, provide 'session-aware'
functionality, and ensure that content is acquired and developed appropriately.
This gives us an overall picture of our user profiles, which in turn shows to
our Editorial Contributors the type of person they are reaching by posting
articles on Mondaq (and its affiliate sites) – meaning more free content for
registered users.

We are only able to provide the material on the Mondaq (and its affiliate
sites) site free to site visitors because we can pass on information about the
pages that users are viewing and the personal information users provide to us
(e.g. email addresses) to reputable contributing firms such as law firms who
author those pages. We do not sell or rent information to anyone else other than
the authors of those pages, who may change from time to time. Should you wish us
not to disclose your details to any of these parties, please tick the box above
or tick the box marked "Opt out of Registration Information Disclosure" on the
Your Profile page. We and our author organisations may only contact you via
email or other means if you allow us to do so. Users can opt out of contact when
they register on the site, or send an email to unsubscribe@mondaq.com with “no
disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate
registration form. This is a personalised service where users choose regions and
topics of interest and we send it only to those users who have requested it.
Users can stop receiving these Alerts by going to the Mondaq News Alerts page
and deselecting all interest areas. In the same way users can amend their
personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an
identifying user number. The cookies do not contain any personal information
about users. We use the cookie so users do not have to log in every time they
use the service and the cookie will automatically expire if you do not visit the
Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to
personalise a user's experience of the site (for example to show information
specific to a user's region). As the Mondaq sites are fully personalised and
cookies are essential to its core technology the site will function
unpredictably with browsers that do not support cookies - or where cookies are
disabled (in these circumstances we advise you to attempt to locate the
information you require elsewhere on the web). However if you are concerned
about the presence of a Mondaq cookie on your machine you can also choose to
expire the cookie immediately (remove it) by selecting the 'Log Off' menu option
as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example,
advertisers). However, we have no access to or control over these cookies and we
are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement,
and gather broad demographic information for aggregate use. IP addresses are not
linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or
its affiliate sites) are not responsible for the privacy practices of such other
sites. We encourage our users to be aware when they leave our site and to read
the privacy statements of these third party sites. This privacy statement
applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or
contests. Participation in these surveys or contests is completely voluntary and
the user therefore has a choice whether or not to disclose any information
requested. Information requested may include contact information (such as name
and delivery address), and demographic information (such as postcode, age
level). Contact information will be used to notify the winners and award prizes.
Survey information will be used for purposes of monitoring or improving the
functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our
site, we ask them for the friend’s name and email address. Mondaq stores this
information and may contact the friend to invite them to register with Mondaq,
but they will not be contacted more than once. The friend may contact Mondaq to
request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’
information. When users submit sensitive information via the website, your
information is protected using firewalls and other security technology. If you
have any questions about the security at our website, you can send an email to
webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode),
or if a user no longer desires our service, we will endeavour to provide a way
to correct, update or remove that user’s personal data provided to us. This can
usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will
post those changes on our site so our users are always aware of what information
we collect, how we use it, and under what circumstances, if any, we disclose it.
If at any point we decide to use personally identifiable information in a manner
different from that stated at the time it was collected, we will notify users by
way of an email. Users will have a choice as to whether or not we use their
information in this different manner. We will use information in accordance with
the privacy policy under which the information was collected.

How to contact Mondaq

If for some reason you believe Mondaq Ltd. has not adhered to these
principles, please notify us by e-mail at problems@mondaq.com and we will use
commercially reasonable efforts to determine and correct the problem promptly.